Has the risk appetite of biotech Investors increased?

Has the risk appetite of biotech Investors increased?

Farmantra

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Finally, US Biotech sector has recovered from slump and has some good news to share. Around 10 companies were listed in the US market this year and there are more in the offing. The public biotech companies have outperformed recently. For example – Celgene’s stock price witnessed around 90% increase in its stock price.

Furthermore, NASDAQ biotech has even outperformed S&P500. The chart below encapsulates the growth of Celgene vs Nasdaq biotech and S&P500

What could be the reason for such boom or it’s just a bubble?

On a pessimistic note, there has not been a surge in blockbuster drugs nor a great discovery for incurable diseases, nevertheless these listed biotech companies have witnessed a huge increase in their stock prices.

Part of it could be explained by hope or expectations from biotech industry as pharmaceutical sector is already grappling with patent expiry crisis and are looking for new blockbuster drugs. This hope has increased the risk taking abilities of investor looking to make huge returns as the investors at Celgene did.

It is indeed good news for biotech companies at early stages who could think of listing itself in the market without conducting clinical trials.